Question

The management of Lanzilotta Corporation is considering a project that would require an investment of $280,000 and would last for 6 years. The annual net operating income from the project would be $114,000, which includes depreciation of $31,000. The scrap value of the project's assets at the end of the project would be $25,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)

Answer 1

Answer:

3.37 years

Explanation:

Calculation to determine what The payback period of the project is closest to

First step is to calculate the Net Cash inflow for the year

Net Cash inflow for the year =$114,000-$31,000

Net Cash inflow for the year =83,000

Now let calculate the Payback period

Using this formula

Payback period=investment/Net Cash inflow for the year

Let plug in the formula

Payback period=$280,000/83,000

Payback period=3.37 years

Therefore The payback period of the project is closest to 3.37 years